Read the FTC's explanation. The FDA approved an extremely limited claim about very sketchy scientific evidence, and Gerber converted that into "the first and only infant formula that meets the criteria for a FDA Qualified Health Claim," with accompanying gold badge, while advertising that its formula could guard against children developing allergies. That was probably a bad idea.

Honeywell maintained that it wasn’t just challenging ICM’s
copying of trade dress, but also ICM’s promotion of its products as “the same
as” Honeywell products.ICM allegedly
copied the appearance of Honeywell’s products “because that appearance gives
contractors the impression that ICM’s products are ‘highly interchangeable’
with the range of Honeywell products they are intended to replace.” However, ICM’s products were allegedly not the
same and not always highly interchangeable with Honeywell products, making ICM’s
marketing false or misleading.Honeywell
also argued that its history of making these products as “private label”
products for third-party competitors contributed to the confusion.

The court was unconvinced.Functionality protects competition and consumers.The allegations didn’t show any false
statement. Instead, ICM allegedly marketed products similar to Honeywell’s,
which created a false impression of affiliation/sponsorship.“But Honeywell International has no
protectable interest in its claimed trade dress. Trade dress infringement does
not arise out of ICM Controls’ products; the marketing of those same products
does not constitute false advertising.”

Comment: I would state the doctrinal result as one that an implicit
performance message, if any, conveyed by copying functional features must be
allowed, even if that causes some confusion, to police the boundaries of
trademark and patent law.This is an unusual example of channeling from
false advertising to trademark; more common is the other way around, where we
usually require complaints about comparative advertising to be made under the
head of false advertising with its stricter falsity, materiality, standing, and
“advertising or promotion” requirements.

Sunlight uses “Titan Controls” for devices that control
indoor gardening equipment. Titaness Light Shop (TLS) began marketing indoor
grow lighting systems under the mark “Titaness.” The court of appeals reversed the district
court’s grant of a preliminary injunction as an abuse of discretion, given that
such an injunction is an extraordinary remedy that requires a clear showing of
entitlement to such relief.

The problem was irreparable harm, as to which conclusory or
speculative allegations are not enough. Irreparable harm can include harm to reputation
and goodwill, but evidence is required, not mere platitudes.Here, Sunlight “Sunlight simply asserted to
the district court that its goodwill and reputation would be irreparably harmed
because TLS’s Titaness products were being sold by a website that supposedly
catered to marijuana growers, while Sunlight had worked hard to ensure that its
products were not marketed to marijuana growers.”Yet Sunlight didn’t show actual or likely
harm.It didn’t show that its customers
were aware of the relevant website; would associate products sold by the site
with marijuana; or disliked marijuana enough to stop buying Sunlight products
if they mistakenly perceived a link to marijuana.Indeed, Sunlight was, at the time the appeal
was argued, actually selling on that site as well.

Money quote: “The fact that Sunlight’s
reputation might be harmed by the
marketing of TLS’s products did not establish that irreparable harm to
Sunlight’s reputation is likely.”

The court adopted the magistrate judge’s recommendation to
grant defendants’ motion to dismiss unjust enrichment claims, but to deny the
motion as to the consumer protection and warranty claims in this dog jerky
contamination case.

Plaintiff Funke sued on behalf of a class of purchasers of
chicken and beef jerky dog treats from Milo’s Kitchen, owned by Del Monte.She alleged that defendants misrepresented
the quality of the treats, that they contained contaminants, and that after she
fed the treats to her dog it became sick and ultimately had to be
euthanized.Among the allegedly
false/misleading claims on the products’ packaging and associated websites: “100%
Real—Wholesome and Delicious;” the ingredient list; “Milo’s Kitchen Home–Style
Dog Treats are 100% real jerky, sausage slices, and meatballs;” each piece of
Milo’s Kitchen Chicken Jerky “is made with whole fillets of 100% real jerky and
the quality and care your dog deserves,” without any artificial chicken flavors
or filler ingredients; and claims that their products comply with USDA, FDA and
other food safety rules.

The FDA released numerous cautions to consumers about
illness in dogs after consuming jerky treats made in China, as defendants’
were.Defendants’ statements that
neither the FDA nor the American Veterinarian Medical Association have been
able to identify the cause of the illnesses or a connection between the
illnesses and the jerky treats and that no contaminants have been found despite
extensive testing were allegedly deceptive.Funke further alleged that Milo’s safety process was deficient and that
the FDA investigation failing to detect contaminants was fundamentally flawed. Moreover, defendants allegedly failed to
respond adequately once the contamination was found.

Funke brought the usual statutory California claims.Defendants argued that the alleged
misrepresentations were mere puffery.Along with those listed above, plaintiff identified other alleged
misrepresentations: that defendants started making Milo’s Kitchen dog treats
because they believed dogs deserve treats made with the same quality of
ingredients and care that their owners want in their food; the jerky treats are
good for pets; and dogs deserve only the best with your food and deserve to
enjoy snacks that not only look like jerky, sausage slices and meatballs, but
actually are 100% real jerky, sausage slices and meatballs.

Other than the statements about defendants’ motivations for
making the treats and the claim that they’re “good for pets,” each of these
appeared verifiable and sufficiently specific to induce reliance. Moreover,
even the statements that were puffery standing alone could contribute to the
deceptive context of the packaging as a whole.

Funke also satisfied Rule 9(b) by alleging that defendants “engaged
in a continuous course of conduct since 2007 (the when), whereby they have made
misrepresentations on the jerky treat packaging and on their websites (the
where), that their products are wholesome, safe, and that they otherwise have
characteristics and qualities that they do not have which is likely to mislead
the public (the what), and that these misrepresentations are false because many
of the packages of jerky treats contain contaminants (the how).” Funke also adequately alleged reliance.

Plaintiff Ruff’s claims fared similarly.(Her dog also died.)She challenged similar claims, including
statements that the product is “100% REAL”; that it was made with “the quality
and care your dog deserves”; and that the jerky treats are “wholesome natural
treats.”She also challenged Milo’s
response to the FDA’s warnings as misleadingly downplaying the evidence and
failing to warn consumers of the dangers.She contended that neither she nor any reasonable person would have
bought the jerky treats if they had known of the material risk of serious harm
to their pets.Along with the usual
California claims, she alleged negligence and strict product liability.

The court found that Ruff adequately alleged a defect and
proximate cause.While an accident alone
isn’t sufficient to prove a defect, defects can be alleged by circumstantial
evidence such as that present here: Ruff bought a package of treats which she
fed to her healthy dog; with no other material changes to its diet, it fell
ill; it died from kidney failure within one week of consuming the treats; since
Nov. 2011, the FDA has logged over 900 reports of illness and death from kidney
failure in pets after consumption of jerky treats.

The court also found that Ruff could represent a nationwide
class for her California UCL and CLRA claims, even though she wasn’t a
California resident.California law may
be applied when the defendant is a California corporation, as here, and some or
all of the alleged misconduct emanated from California, as alleged here, where
Ruff pled that California was the headquarters for Del Monte’s US marketing and
that the California location provides all customer support and makes all
corporate decisions regarding marketing.She could also bring a North Carolina UDTPA claim, because she lived
there.

Ruff’s Magnuson-Moss Warranty Act claims for breach of the
implied warranty of merchantability survived even though there was no
privity.The rule requiring privity has
an exception for “foodstuffs,” and there was no reason to limit that exception
to human food.

Monday, October 27, 2014

Gedalia sued on behalf of a putative class of people who
bought Whole Foods’s private-label 365 Organic and 365 Everyday Value products
allegedly falsely labelled as being organic, natural, and/or GMO-free. Plaintiffs brought claims under various state
consumer protection laws as well as common-law theories.The claims encompassed hundreds of different
products; the court expressed doubt about plaintiffs’ standing to represent
consumers of products they didn’t purchase, but didn’t resolve the issue
because it ruled on lack of plausible reliance. Likewise, the court was
skeptical that plaintiffs could bring claims based on online and in-store
representations not present on the actual packages, because they didn’t allege
they saw those representations.

The court did reject preemption arguments; the Organic Foods
Production Act (OFPA) does not clearly indicate a purpose to occupy the field,
nor did it conflict with relevant California law.Nor were “natural” claims impliedly preempted
by the FDCA/NLEA.Reliance on the
primary jurisdiction doctrine “would likely be unfruitful due to the agency’s
long-standing reluctance to officially define the term ‘natural.’”

The sticking point was a misrepresentation that would be
likely to deceive a reasonable consumer.This is usually a fact question unsuited for a motion to dismiss, unless
“the advertisement itself made it impossible for the plaintiff to prove that a
reasonable consumer was likely to be deceived.”Other cases have noted that there’s not much reason to think that
consumers know or understand federal definitions of things like “organic” or
“synthetic.” Williams v. Gerber, 552
F.3d 935 (9th Cir. 2008), held that consumers aren’t required to read the
ingredient label to correct misleading impressions from the front of a package.
In particular, a claim to be made with fruit and “other all natural
ingredients” could reasonably be interpreted to mean “all the ingredients in
the product were natural.” Subsequently,
courts have generally held that the definition of “natural” is a question of
fact, to be determined based on “contextualized evidence regarding consumer
perceptions.” However, courts have also
required pleadings to specify which ingredients are unnatural.And some healthy-sounding terms have been
held to be puffery.

Here, the allegations were that 365 Brands deceptively include (1) non-organic
ingredients in organic products, (2) GMOs and (3) Unacceptable Ingredients.
Plaintiffs submitted hundreds of product label images, but none of the labels
said “100% organic,” though they did have USDA and third-party certification
seals. Plaintiffs alleged that the products include “synthetic ingredients that
are not permitted in organic foods” and that “have not been approved to be used
in any food at all, much less in organic food.”But they didn’t allege that the certifications were invalid or that the
labels violated USDA regulations.OFPA
allows non-organic ingredients in “organic” food, depending on the label.There was no reason to believe that “the
reasonable consumer would assume 365 Brands organic products are any more
organic than what organic certifying agencies require.”

GMOs: many of the labels stated that “365 Everyday Value
products are formulated to avoid genetically engineered ingredients.” However,
lab test results showed 365 Everyday Value Corn Flakes contained 57% GMO corn.The Whole Foods website directed consumers to
buy 365 Everyday Value products if they wanted to avoid GMOs and stated that
“[a]ll ingredients derived from plants are sourced to avoid GMOs, and hundreds
of those products are verified by the Non-GMO Project.”However, another page on the website
distinguished “enrolled” and “verified” non-GMO products. “While the website is
not a model of clarity, the lab results and other evidence do not show 365
products were not ‘sourced to avoid’ GMOs, nor that verified non-GMO products
contained GMOs.”None of the labels and
literature stated that 365 Brands products were “GMO free.”(Really?Because that seems pretty misleading to me; the implicit message is
clearly that there aren’t GMOs, even if it’s carefully worded to avoid making
that explicit claim.)

As for Unacceptable Ingredients, that came from a list on
the Whole Foods website. That list started with a bold disclaimer that Whole
Foods reserved the right to change the list at any time, and appeared to be
written for producers hoping to sell their products to Whole Foods. Plaintiffs alleged that they bought products containing
Unacceptable Ingredients, including “irradiated foods” (cholecalciferol,
ergocalciferol), “nitrates” (thiamine mononitrate), “artificial colors,” and
“artificial flavors.” Whole Foods disputed the definition of “irradiated
foods,” arguing that it targeted “the use of ionizing radiation in meat,
produce, seafood and freestanding spice products, not obscure nutrient,
vitamin, and mineral ingredients.”

Also, plaintiffs argued that all food coloring was
“artificial,” even those made of “natural” ingredients, according to the FDA
definition of “color additive.” They alleged that these ingredients didn’t meet
the reasonable consumer’s understanding of the term “natural,” which “comports
with federal law and Whole Foods’ proffered definition.” Whole Foods elsewhere
defined natural foods as “foods that are minimally processed, largely or
completely free of artificial ingredients, preservatives and other
non-naturally occurring chemicals and as near to their whole, natural state as
possible.” The USDA allowed “natural” on meat and poultry labels, as long as
the products didn’t contain “any artificial flavor or flavoring, coloring
ingredient, or chemical preservative, or any other artificial or synthetic ingredient”
and provided that “the product and its ingredients are not more than minimally
processed.”Elsewhere, regulations
define synthetic as “[a] substance that is formulated or manufactured by a
chemical process or by a process that chemically changes a substance extracted
from naturally occurring plant, animal, or mineral sources.”While the FDA has no official “natural”
definition, as a matter of policy it treats the term “as meaning that nothing
artificial or synthetic (including all color additives regardless of source)
has been included in, or has been added to, a food that would not normally be
expected to be in the food.”

Because the FDA definition incorporated normal consumer
expectations, it didn’t help with the reasonable consumer standard. The Whole
Foods definition circularly defined “natural” as “not artificial” and “as near
to [a] natural state as possible.” The USDA definition was more stringent, but
was limited to meat and poultry. Still,
Whole Foods didn’t offer an alternative definition that might include all the
allegedly “artificial” ingredients plaintiffs challenged. Instead, it argued
that the proffered interpretation was “based on arcane and technical regulatory
definitions, not what a reasonable consumer would consider the terms to mean.”While whether reasonable consumers would
consider an ingredient “natural” is a fact question, plaintiffs weren’t
challenging the label “all natural” but were alleging misrepresentations based
on the Unacceptable Ingredient list, from a page that plaintiffs didn’t show
reasonable consumers would visit or rely on.

Plaintiffs also relied on images of advertising and signage
that state, e.g., “Nothing artificial ... ever, ever, ever.” But none of the labels referred to the
Unacceptable Ingredient list.The court
couldn’t find references to “natural” or “artificial” ingredients on the
submitted labels, though it was possible that they existed but weren’t legible
on the submitted images. “Based on the images submitted, a reasonable consumer
would not consider such drawings to be more than decorative graphics and would
not rely on them in purchasing the products.”Plaintiffs argued that Whole Foods’ broad representations on its signs
etc. belied the “dizzying array of ingredients” listed on its products. “But
that is the purpose of requiring ingredient lists on every product label.”

Plaintiffs’ argument reduced to the idea that, “since Whole
Foods has developed a successful brand as a provider of natural foods, it
should be obligated to guarantee every molecule in every product it sells under
its in-house brand is natural,” and likewise with “organic,” in spite of OFPA’s
tiered labeling regime.Although the
court commented that there’s an argument that organic labeling is inherently
misleading, plaintiffs didn’t show how Whole Foods’ use of the term was any
different from that of other organic producers, and the same was true of
“natural.”

“Natural” cases allowing claims to proceed required “contextualized
evidence regarding consumer perceptions,” but the claims here were far too
broad.“The only common representation
on the actual labels of 365 Products is a logo stating ‘365 EVERYDAY VALUE.’”
This didn’t plausibly suggest natural ingredients, but rather suggests that the
products were less than premium quality.

Plaintiffs (A.T. Your Service Cleaning and Janitorial) sued
defendants for trademark infringement and related business torts.ATYS is a cleaning service in San Diego.LivingSocial is a national online marketing
company that advertises deals and discounts on behalf of merchants. Plaintiffs
signed an agreement with LivingSocial allowing it to advertise and sell
vouchers for ATYS in San Diego; there was an arbitration provision covering “any
dispute, claim, or disagreement arising from or relating to this Agreement or
the breach thereof.”This advertising
relationship lasted a few months in 2012.

In April 2013,
plaintiffs contacted LivingSocial again, but was told there was a 2-3 month
wait time in San Diego.In May,
plaintiffs heard from an existing customer that the customer had bought a
voucher for ATYS through LivingSocial.The
voucher was not for ATYS, however; it was another company, At Your Service
Housekeeping, also in the San Diego area.LivingSocial didn’t include a phone number for AYSH on the vouchers it
sold; customers who searched for “At Your Service San Diego” found plaintiffs’
web site and telephone number. Plaintiffs received calls from customers who
mistakenly thought they bought vouchers for ATYS. The complaint also alleged
that AYSH failed to honor its vouchers, causing confused consumers to give
negative reviews to ATYS on Yelp, Google, etc., harming ATYS.

LivingSocial argued that this dispute had to be arbitrated,
since plaintiffs’ trademark claims “related to” the agreement.Plaintiffs pointed out that they made no
allegations relating to the terms and conditions of the parties’ agreement. The
court found that the arbitration was worded broadly, reaching “every dispute
between the parties having a significant relationship to the contract and all
disputes having their origin or genesis in the contract.” Nonetheless,
arbitration may only be ordered when the parties agreed to arbitrate their
dispute.

LivingSocial argued that plaintiffs’ trademark claims
depended explicitly on the prior contract, and pointed to plaintiffs’
allegation that LivingSocial helped plaintiffs’ mark “become famous and
distinguished” through LivingSocial’s assistance with promoting and
strengthening the mark.(Comment:
Aaargh.On the facts alleged, ATYS has
suffered significant harm, but there is no way they have a famous mark and
alleging dilution should be understood as meriting an award of fees to
defendants in cases like this.)

But claims “arise from” an agreement or breach when the
claims relate to “the interpretation and performance of the contract itself.” Resolution of the infringement claims wouldn’t
require interpretation of the contract or of the parties’ performance
thereunder.The agreement didn’t say
anything about LivingSocial’s rights or obligations with respect to ATYS’s
mark. The infringement claims “constitute independent wrongs” and didn’t “arise
from” the agreement.Similarly with
false advertising and unfair business practices claims: the agreement didn’t
refer to LivingSocial’s right to advertise competing business, and nowhere in
the agreement did LivingSocial agree to refrain from providing advertising
services to companies with similar names.The claims here weren’t based on LivingSocial’s relationship with ATYS;
they were based on LivingSocial’s relationship with AYSH.

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